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‘ Bye, bye SAB 121! It’ s not been fun’: Controversial crypto regulation axed by SEC
The rescission will be music to the ears of traditional custodians, which have been vociferously opposed to the directive since it was issued in March 2022.
The US Securities and Exchange Commission( SEC) has officially rescinded the controversial crypto directive, SAB 121, which has prevented US custodians from providing custody services for digital assets. The staff bulletin – which required custodians to hold the equivalent value of held assets on their balance sheet – had been met with considerable opposition since it was first issued in March 2022. Industry bodies and market participants have since collaborated in efforts to overturn the directive, with a formal repeal process started in early 2024. Those efforts saw the resolution pass through both the House of Representatives and the US Senate, before being vetoed by President Biden, who said at the time:“ This Republican-led resolution would inappropriately constrain the SEC’ s ability to set forth appropriate guardrails and address future issues.” The rescission will be music to the ears of the US-based custodians, which have had to put the brakes on the development of their digital asset units. When the spot bitcoin ETFs were approved in the US early last year, traditional custodians were effectively frozen out of providing custody services to the funds – opening the door to non-traditional providers such as
Coinbase, Gemini and BitGo to win the majority of mandates. Following efforts to work with the regulators on a suitable solution, BNY was granted in September permission to provide custody services to regulated crypto exchange-traded products( ETPs). Commenting on the latest development, a BNY spokesperson said:“ This is an important milestone in furthering the institutional adoption of digital assets. We support the development of a legal and regulatory framework that promotes a level playing field for all market participants.” Donna Milrod, chief product officer and head of digital asset solutions at State Street, also commented:“ Removing this arbitrary barrier to leveraging the services and stability of well-regulated banks in the digital asset space is an important step forward for investors and capital markets.” Hester Peirce, an SEC commissioner since 2018 and vocal objector of SAB 121, responded to the news with a tweet:“ Bye, bye SAB 121! It’ s not been fun.” Peirce will also head up the new crypto task force established by the SEC,“ dedicated to developing a comprehensive and clear regulatory framework for digital assets”. The initiative will“ draw from talented staff across the agency,” and specifically work for the development of the asset class, helping the Commission to“ draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously”.
12 Global Custodian Spring 2025